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I think the choice is simple, but you might know better

July 9th, 2017 at 11:39 pm

So...as you may know I only have three large debts remaining:

1. Primary Residence Mortgage. The original loan amount was $108,000.00 in 2012. The balance is $97,000.00. I've paid off $11,000.00 in five years.

2. Auto Loan. The original loan amount was $17,000.00 in 2015. The balance is $12,000.00. I've paid off $5,000.00 in two years.

3. Rental Mortgage. The original loan amount was $101,000.00 in 2005. The balance is $81,000.00. I've paid off $20,000.00 in twelve years.

I am trying to decide which loan to pound away at from a pre-pay standpoint first. My thought is the Auto Loan. It is unsecured but has no deduction benefit(s). The car is in great condition and runs very well! No issues, thank God!

Next, in my opinion, would be the rental mortgage. The only purpose for this would be to increase the equity (by reducing the mortgage amount), get it to about 30% and refinance it. Pulling cash out to reinvest in updates, improvements, landscaping, etc. I can easily increase the monthly rent by $200.00 if I complete said improvements.

Finally, my primary residence.

As I think you will see once I focus to the retirement baseline plan, a big part of it is reducing/eliminating debt. If I can get rid of the auto loan, continue to maintain fiscal requirements at the rental via rental income and payoff my primary residence, I would be taking a massive step towards putting myself in position to possibly retire. This would increase upon the sale of the primary residence and/or rental as well.

Still a work, I mean a plan in progress, but these were just some thoughts I had running through my head tonight.

Thanks for listening..............

Posted in Debt | 6 Comments »

6 Responses to “I think the choice is simple, but you might know better”

  1. patientsaver Says:
    July 10th, 2017 at 12:31 am 1499646674
    1499646674

    What are the interest rates you're paying on each loan?

  2. Out of the Dark Says:
    July 10th, 2017 at 12:40 am 1499647209
    1499647209

    Great point....7.9 percent for rental, thus the need to refi however in my state non owner occupied carries a much higher rate.... primary residence is 4.125 percent and the auto loan is about 3 percent. With that in mind, logic would say the rental but again, Tenant pays it and I need a bit more equity to refi via OPM....other people's money.

  3. Petunia 100 Says:
    July 10th, 2017 at 12:40 am 1499647218
    1499647218

    What is the value of your rental house? What matters, in terms of the proposed new mortgage, is the value of the house in relation to the new mortgage balance. The percentage remaining of the original mortgage is irrelevant.

  4. creditcardfree Says:
    July 10th, 2017 at 12:18 pm 1499689111
    1499689111

    Yep, I would definitely be paying the auto loan first. It is a depreciating asset.

  5. LuckyRobin Says:
    July 10th, 2017 at 02:21 pm 1499696513
    1499696513

    I'd go for the car loan first. I know a lot of standard financial advise is to go with the highest interest rate first, but paying off one of the lower balances first means you're left with only two payments sooner. That is a big psychological boost. Plus it will take so long to pay off one mortgage that it would make you feel like you weren't making any progress at all. Owning the car free and clear will also make your insurance drop some, or a lot if you drop collision and just carry liability and uninsured motorist, assuming you are a good driver who doesn't cause accidents.

  6. rob62521 Says:
    July 11th, 2017 at 07:18 pm 1499800738
    1499800738

    I would say pay off the auto loan. I hope you didn't finance it for 6 years. I don't understand why folks want to pay on a vehicle that long because I would imagine they will owe more than the thing is worth after a few years. Of course a friend of ours never pays his vehicle off...he just keeps rolling more and more debt over. Not smart, but then again, he has loans and more loans, even financing vacations. Yikes!

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